S&P lowers Xella

S&P said it downgraded its ratings for Xella’s holding company LSF10 XL Investments Sarl and its debt to B- from B.

Xellas’ first-quarter sales fell by 9.4% compared to the previous year though price hikes in the second half helped offset the decline, the agency noted.

“We forecast a revenue decline of 10%-15% in 2023 and gradual recovery in 2024. Xella has been suffering from weak consumer demand for its walling solutions and products since the second half of 2022. The downward trend is mainly explained by high inflation and increased mortgage rates, which weigh on consumers' disposable income, as well as the very challenging basis for comparison – as 2021 and 2022 were record years for volumes and results. These factors are particularly impairing the residential new build end market, which represents over 65% of Xella's total sales,” S&P said in a press release.

Additionally, “We expect adjusted leverage of 8.6x in 2023 and 8.2x in 2024, which is much higher than our previous expectations. As such, our expectation for adjusted leverage is no longer commensurate with the B rating,” S&P noted.

The outlook is stable.

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